Beijing launches carbon trading scheme

By Edd Gent

Published Thursday, November 28, 2013

Beijing has become the third Chinese city to launch a carbon trading scheme, as the country tries to regulate soaring CO2 emissions.

First trades are reported to have gone through this morning at 50 yuan (£5) per permit after the capital followed newly established markets in Shenzhen and Shanghai, with Guangdong province set to open one in December that will be the second-biggest in the world after the EU.

The regional markets are part of China's strategy to cut its greenhouse gas emissions per unit of GDP to 40 to 45 per cent below 2005 levels by 2020 as the country seeks to limit climate change, address future energy security issues and stave off international criticism for being the world's biggest emitter.

The Beijing emissions trading scheme will rein in emissions from 490 power and heat generators, manufacturers and large buildings in China's smoggy capital.

The government has not released information on how many permits have been issued to scheme participants, but has said 42 per cent of the city's total CO2 emissions will be covered.

Coal-fired power plants, which contribute to Beijing's huge air pollution problem and were linked in June to 60 per cent of the region's premature deaths in a Greenpeace report, will receive free permits for 2013 equal to 99.9 per cent of their average emissions over 2009 to 2012. By 2015, the amount will drop to 99.5 percent.

Manufacturers will receive permits this year equal to 98 per cent of their historical emissions, falling to 94 per cent in 2015.

Those that emit more than they have permits to cover can buy additional permits, formally called Beijing Emissions Allowances (BEAs), from others or use offset credits issued by the central government, known as Chinese Certified Emissions Reductions (CCERs).

The China Beijing Environment Exchange (CBEEX), which hosts trading in the Beijing market, told Reuters that two bilateral trades for a total of 40,000 permits had been registered today at 50 yuan per permit. Each permit represents one tonne of carbon dioxide.

State-owned oil and gas company Sinopec and investment bank CITIC Securities each bought 20,000 permits, while a smaller deal for 800 permits went through on the exchange at 51.25 yuan.

In comparison, emission permits closed yesterday in Shenzhen at 80 yuan and in Shanghai at 28 yuan. The different price levels show it is still early days for market participants and that there is great deal of uncertainty about whether permits are scarce, according to observers.